Well, the Irish ones at least. And before you ask, this is not the view of some raving Bolsheviks but 20 of Ireland’s top economists.

In a letter published in the Irish Times on Friday they argue that proposals to buy €80-90bn of property related loans from the country’s main financial institutions are wrongheaded and will not clean up the Irish banking sector.

You can read the full letter here, but here are some selected highlights.

The banking system is widely perceived to have seized in terms of lending, and whether correct or not this perception needs to be addressed. We believe that the correct action to take now is nationalisation of the banking system, or at least that part of it that is of systemic importance.

We do not make this recommendation from any ideological position. In normal circumstances, none of us would recommend a nationalised banking system. However, these are far from normal times and we believe that in the current circumstances, nationalisation has become the best option open to the Government.

Furthermore, we explicitly recommend nationalisation only as a temporary measure. Once cleaned up, recapitalised, reorganised with new managerial structures, and potentially rebranded, we recommend that the banks be returned to private ownership.

In introducing its proposals for the National Asset Management Agency (Nama), Government Ministers and Peter Bacon, the consultant who recommended this plan to the Government, have stressed that they see their current plan as likely to produce a superior outcome to nationalisation (though they concede that majority State ownership may be required).  We disagree strongly.

We see nationalisation as being the inevitable consequence of a required recapitalisation of the banks done on terms that are fair for the taxpayer.

We can summarise our arguments in favour of nationalisation, and against the Government’s current approach of limited recapitalisation and the introduction of an asset management agency, under four headings.

We consider that nationalisation will better protect taxpayers’ interests, produce a more efficient and longer lasting solution to our banking problems, be more transparent in relation to pricing of distressed assets, and be far more likely to produce a banking system free from the toxic reputation that our current financial institutions have deservedly earned.

Yours sincerely,

Karl Whelan, professor of economics, dept of economics, UCD; John Cotter, associate professor of finance, Smurfit School, UCD; Don Bredin, senior lecturer in finance, Smurfit School, UCD; Elaine Hutson, lecturer in finance, Smurfit School, UCD; Cal Muckley, lecturer in finance, Smurfit School, UCD; Shane Whelan, senior lecturer in actuarial studies, school of mathematics, UCD; Kevin O’Rourke, professor of economics, Trinity College Dublin; Frank Barry, professor of international business and development, school of business, Trinity College Dublin; Pearse Colbert, professor of accounting, school of business, Trinity College Dublin; Brian Lucey, associate professor of finance, school of business, Trinity College Dublin; Patrick McCabe, senior lecturer in accounting, school of business, Trinity College Dublin; Alex Sevic, lecturer in finance, school of business, Trinity College Dublin; Constantin Gurdgiev, lecturer in finance, school of business, Trinity College Dublin; Valerio Poti, lecturer in finance, DCU business school; Jennifer Berrill, lecturer in finance, DCU business school; Ciarán Mac an Bhaird, lecturer in finance, Fiontar, DCU; Gregory Connor, professor of finance, department of economics, finance and accounting, NUI Maynooth; Rowena Pecchenino, professor of economics, department of economics, finance and accounting, NUI Maynooth; James Deegan, professor of economics, Kemmy School of Business, Limerick; and Cormac.

Related link:
Citi says keep selling Irish banks – FT Alphaville/Long Room

This entry was posted by Neil Hume on Friday, April 17th, 2009 at 8:54 and is filed under Capital markets, People. Tagged with brian lenihan, Irish banks, Nama. Edit this entry.